Cost Saving Opportunities in an Uncertain Market

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Turmoil in the market and rising inflation have the potential to impact manufacturing unit economics across the board. It’s at times like these where understanding business operations and the efficient use of assets can make a big difference. As it relates to managing a manufacturing workforce, plant leaders can get leverage out of better quantifying and then maximizing skill coverage. In this blog post, we discuss coverage optimization as a source of cost-savings : improved overtime management and decreased costs of poor quality (COPQ). 

As a reminder, by coverage, we are referring to maintaining the appropriate number of specifically qualified workers to meet demand on any given shift. A skills gap, in this sense, can also be called a "coverage gap." These gaps are essential for leadership to uncover because they can impact daily production outcomes.

The term "workforce coverage" or just "coverage" can be used to quantify these gaps through a simple equation:

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Check out this blog for more information on how your organization can manage these coverage gaps. 

Overtime Cost Savings

The average manufacturer pays for nearly 4 hours of overtime per week per employee, or about 500 hours a year. With a continued deficit of skilled workers in the market, plants will continue to to keep these costs under control without a comprehensive strategy in place

One method that plant leaders can employ to bring down these overtime costs is to increase skill coverage across their organization through targeted cross-training. Often, overtime is needed because there are not enough workers with the required skill sets on a given shift, resulting in backlogs that only a few workers are qualified to work on. Increasing skill coverage across the plant results in a more agile workforce that can be adapted to meet various demand scenarios. A flexible workforce provides plant managers with the skill sets needed to minimize backlogs and the need for overtime.  

Costs of Poor Quality

Poor quality outcomes are often a result of poor training. Many studies find that more than 80% of non-conformances are caused by human-error.  Related workforce skill gaps have downstream effects such as declining product quality, higher scrap rates, and poor use of raw materials. To combat this cost, it’s critical to arm front-line leaders with real-time skill coverage data to make resource decisions and install skill-based process controls. These measures can ensure that operations are consistently meeting quality standards and effectively reduce the risk of costly non-conformances.

Building a clear picture of operational skill gaps and taking efficient measures to fill them can not only instill confidence in workforce decision-making processes but also drive significant cost savings at the plant level. To learn more about how Covalent improves skill coverage for manufacturers, take our free self-guided tour. 

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